tv Closing Bell CNBC April 11, 2014 3:00pm-5:01pm EDT
♪ ...and unleashes wrath. ♪ temptation comes in many heart-pounding forms. but only one letter. "f". the performance marque from lexus. welcome to "closing bell" on a friday that's been a rough week here for the market. i'm kelly evans here at the new york stock exchange where we are seeing a familiar pattern today. bill, we opened up looking okay and we've since moved down pretty steadily. the nasdaq, keep a pretty close eye on this up. it's at 4001. it may breach that 4000 level as the selling continues. >> i'm told it's not as bad as yesterday at this time. i'll have to take your word for that. technology and health care have been dragging this market lower. we'll get a check on the major
averages as we enter the final hour of trade here and see whether or not they want to be long going into the weekend here, a question we often ask on a friday, but for a different reason. geopolitical usually. now you'll wonder if they just want to be out because of what could happen on the asian markets over the weekend. >> as mentioned, here's where we stand on the 4000 level. yesterday we were watching a 4050 level. how quickly we've gapped down, off 1.3%. the s&p is shedding 16 points right now. the dow off 136 though, 16,034 is the level as we enter the final hour. >> let's get to it in our "closing bell" exchange for this friday. susan fulton from fbb capital partners is with us, ken moraif from money matters, chad morgenlander and rich peterson from s&p capital iq, all very pleased that art cashin from ubs is making a rare appearance in the "closing bell" exchange and
rick santelli out of chicago so a full house today. arthur, what is your view of what's going on today? >> well, we've got a couple of things going. they tried to rebound that yesterday's selloff. it was successful somewhat in the morning. as the afternoon wore on concerns about geopolitical rumors helped put some weight on them. we now made lower lows, we haven't sprung into any cascade selling at all, but the viewers should keep their eye on the yield on the ten-year and stocks. if stocks go down and the yield on the ten-year goes down and particularly if gold starts to pick up, that tells you there's a little bit of a flight to safety. >> and we've got to go to some breaking news here in a moment, but just before we do, we just went below 4000 on the nasdaq. what does that say to you? >> it indicates probably further weakness as we go into next week. >> okay. hold those thoughts. we do want to get some breaking news in here on general motors. phil lebeau, what do you have
for us? >> reporter: document have been released from general motors, same documents turned over to the highway traffic safety administration and 15 minutes ago we saw a headline who mary barra who said from the beginning had no knowledge about the incidents involved in the recall ever 2.6 million vehicles, she has said that now from the beginning, well, there is a headline saying that there was an e-mail, mary, we've had a chance to look at the e-mail and let me put this into context, from october 2011 and at the time there was an e-mail sent to mary, mary, during the initial cobalt case, the ion data did not justify being included with the larger recall that was being investigated. this situation has been evolving. we will meet and understand the latest data fyi, and that was sent to mary bar rra in relationship to an article about a further investigation by nhtsa
about the loss of steering. the only e-mail that mary barra was named, no indication that she's read it or responded. we're looking at documents, going through all of them. some do indicate that cost was definitely considered when deciding whether or not to initiate any changes in the ignition switch so we'll continue going through them, guys, and we'll be back to you with more. >> very good. we'll be seeing you a little bit later in the program as well. looking forward to more details on that. >> you bet. >> thank you for joining you go. back to the story of the day, of the week, the year, the markets, and what's been going on here. susan fulton, what do you make of what's going on, and what are you doing with your clients' money right now? >> well, we're investing right now. we're actually taking a position about two days ago that we think pays a 3% dividend that we like. i would say in mary barra, in a
world that is capitalist cost is always a consideration. >> what do you mean by that? >> a capitalist world wants to make a profit so cost always plays a game. >> at the expense of safety? >> well, that's one of the reasons we have regulators. the reason we have regulators is because, yes, in a capitalist world. >> do you need a regulator to tell you that you have to do something to make it safe for your cars to be on the road? >> in my experience, in the real world, yes, you do. >> wow. >> oh, come on. >> susan, would you own general motors shares here? >> i -- i don't own general motors shares. >> would you? would you buy them here? >> i would buy them here. i think mary barra is a pretty straight-up lady. >> and you think she will survive this latest disclosure. >> i would be shocked if she didn't. >> rich, what about you? >> general motors i don't cover. this will be a very difficult hurdle for her to get over, of course, in the public eye with all the scrutiny. so from that perspective i
really have no opinion. general motors though is a well-capitalized company and it has been after the reorganization. it's on firm footing from that perspective. i don't think this generally will be a credit discount or credit downgrade. >> ken, thoughts here, just reacting quickly to what we heard from general motor. >> i think i agree with what the other guests on your show have said. i think general motors will definitely survive this. i think that the likelihood is that it will be a news flash but it will pass, so, if anything, this may be a buying opportunity. >> so you're thinking about buying it at this point, okay. >> rich peterson, earnings season has just begun. we've had mixed reports so far. what do you make of what we've heard so far? expectations for a high going into this earnings season. >> a couple things. first regarding gm. let me say, you know, one issue, like any charge that comes about on the recall, where does it
come into the first quarter earnings or second quarter earnings, that's to be determined? regarding the earnings season, you know, we were, you know, poised for a poor quarter. we're looking for the cold, crimea, the chinese numbers, the fact of the matter is now we've slipped negativing negative 1.2% according to estimates on the s&p 500. the fact is financials are very poor. you know, investments will be solid for next week, only a four-day trading week because of the good friday holiday, thank the lord, but the fact of the matter is we have citi corp reporting on monday, fact of the matter for three of the past five quarters they missed consensus numbers so the bar is set very low. the key is on wednesday. wednesday you get housing starts and also you get bank of america reporting. >> right. >> rinchings ich, i'm just curi talking to people and trying to gauge how much further this correction goes. the s&p is only a couple
percentage points, nasdaq fall n7% from its peak and the problem is no way for some of these names that are declining to figure out where they are going to rest on the fundamentals because the fundamentals just aren't really there so from that point what can you tell us about valuation in some of these high-flying spaces. >> that's a good question. s&p, up of my colleagues asked me today about ipos and what's the typical valuation of some of the ipos. many of the ipos are like many earnings, so there's no rational way to gauge these numbers. >> we should mention that zoe's kitchen today, and perhaps it helps that it's a food company, up 65% in its debut. only one of four that made it through. eight were supposed to. >> four were cancelled last night as a result of yesterday's selling. rick santelli, i would love to hear you and arthur cashin have a discussion about the ten-year because art has been talking about that is what the stock market's keying in on right now. what do you think is the motivating move for the ten-year right now, rick? >> i think the ten-year is going to continue to handicap the gap
or the lack of growth reaching potential in the u.s. economy. we can spend months debating the reasons, but pretty much all the viewers and listeners know where i stand, and i think this dynamic is in place. when i look at such big psychological lows as 4000 in the nasdaq and 16,000 in the dow, i think there's a lot of room. now is this the big one, i'm not sure, but i'll tell you what. the bullish look of the charts on the long end and the complexion of the curve auger, i wouldn't move away from the notion that this could be a corrective action. there's a lot of anxiety, the vix and others that monitor option volatility, none are flashing red. i personally think that this is the perfect storm and i think one of the cat lifts nobody thought of, you know, all the weather. so many people avoid being true as to where the market was pricing a couple months ago due to the weather, and i personally, whether it's some of the retail sales data of late or some of the jobs reports that
are march numbers, i think that was greatly overestimated, and that's going to give it a little more traction, in my opinion, to the downside. stocks upside in treasuries. >> what do you think, art? >> i think rick is right. the flattening of the yield curve and what's going on in the ten years strongly hints that the economy may be losing strength and we get the added bonus that it's the litmus test for a geopolitical problems, here it is a friday going into the weekend and rumor mongers will be out, so it will be important how they close here for stocks, but the ten-year has guided us pretty well. >> rick talked about the weakness in japan overnight that we might see, chad. we went below 14,000 on the nikkei, that could be one tale. the tact that the 30 crier went below 3.5%, quick last word, chad? >> my quick last word, is yes, we have had this really pothole of economic data that has come in, but you are starting to see some improvement. the initial claims number on thursday or yesterday was very good.
you also saw auto sales that were very good, so -- >> that's what's so screwy about it. you can see a 5% to 7% correction or 10% correction, and that was something that we haven't seen in 18 months. i don't think though that we're going to go into this bear market. i think the economy is going to start to tick higher where gdp will land around 3% and the market in general will be up around 6% to 8% for 2014, so, yes. >> before we go. >> go ahead, finish your thoughts. >> we're getting this correction and everyone is starting to get into panic mode here. >> yeah. >> and we're only down about 2% on the s&p. >> now the ten-year syndicating a slowdown, but that's also like art said, it's because of the geopolitical unrest. >> before we go, mr. cashin, as we go to the last house, give us some levels that you're watching. what are the key levels you're watching right now? >> well, i wouldn't -- keep an eye on the nasdaq because it has reasserted itself as the leader on the downside. earlier today it was -- it was the dow that was otherwise. so i would look for the dow at
probably 16,000. if that breaks you could pick up some selling nasdaq. i would make it probably 32992, 39990 in that area, and right now it's an eternity until we close and right now the market closings are leaning to the sell side so this could be a very interesting close. >> thank you all. >> thank you much. >> thank you. >> an eternity to the close. >> actually 50 minutes or 48 minutes. >> but that -- still perfectly cap turts way tures the way we >> dow down 120 point as we head towards the close. 17 consecutive quarters of earnings growth. wells fargo surging on the heels of its latest report. the company's chief financial office will give the outlook for a very important sector of the economy, mortgage lending. the banking sector in these
shaking markets. coming up. >> also the story we were discussing, new documents just out suggest gm chief mary barra knew about problems related to the massive auto recalls, injuries and deaths. phil lebeau with more on this bombshell just ahead. >> plus, who is winning the race among the big three in social media, facebook, linkedin and twitter. the answer may surprise you. don't go anywhere. don't go anyw. ♪ geico motorcycle. see how much you could save. don't go anyw.
maestro of project management. baron of the build-out. you need a permit... to be this awesome. and you...rent from national. because only national lets you choose any car in the aisle... and go. and only national is ranked highest in car rental customer satisfaction by j.d. power. (aaron) purrrfect. (vo) meee-ow, business pro. meee-ow. go national. go like a pro. in today's market, a lot can happen in a second. with fidelity's guaranteed one-second trade execution, we route your order to up to 75 market centers to look for the best possible price, maybe even better than you expected. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. call or click to open your fidelity account today.
welcome back. more breaking news now on general motors. some of these documents that are coming out. phil lebeau, what else are you finding? >> reporter: a lot of document are e-mails between engineers who worked on the cobalt when it was launched back in 2004 and then through the years, and we're looking at one e-mail that was sent by john hendler, an engineer who handled the cobalt launch, and two sentences in this e-mail are going to resonate with a lot of people. the first one saying as the vsu, one of the service engineers on the cobalt launch, i was very aware of an issue with, quote, inadvertent ignition offs, end kwoit quote, due to the low-mounted ignition switch in the steering column and the low
efforts required to rotate the ignition. in that same e-mail, he later goes on to discuss the pros and cons of changing the ignition switch, and he said, the con, in other words, one of the negatives to consider of the change is that the piece costs of the ignition switch went up about 90 cents per switch and would require $400,000 in tooling too-to-add the almost $500 in volume. again, just one document that we've had a chance to take a look at here as the house energy and commerce committee releases some of the document that have been turned over by general motors regarding the recall investigation. bill, kell, back to you. >> all right, phil, thank you. we'll be seeing you again a little bit later. >> markets winding down this wild trading week with some relative -- well, it says here there was relative calm. there was when you wrote that. the dow is down 118 right now and the nasdaq flirting with that key 4000 level. >> did go below t.holding right there now. >> kelly, let's start d.gm one
of those consumer discretionary stocks leading the dow lower in the s&p. check out a positive story, this is zoe's kitchen surging on its nyse debut, priced $15 a share and trading up 70% so there's some appetite for certain types of ipos and then there's iac interactive. the company has reportedly bought a 10% stake in the tender dating site at around $5 billion so decent shares there. truly yea trulia, the an line real estate company and jc penney, down 10% and wells fargo posting stronger than expected results with profits coming up 14% over the same time last year, so a different story with jpmorgan, but for wells fargo kelly, a nice move to the upside on a down day.
back over to you. >> certainly is, dom, thanks very much. for more on the wells fargo earnings beat we're joined by tim sloan. >> he's chief executive officer of wells fargo, or at least until may 15 and also a member of cnbc's global cfo council, i guess, at least until may 15. you'll run the wholesale banking group for wells fargo, right, tim? >> that's correct, bill. >> congratulations. >> thank you very much. >> bill, you mentioned -- >> i'm sorry, go ahead. >> what were you going to say? >> well, you mentioned earlier that it was our 17th consecutive quarter of earnings growth, and we're very, very proud of our performance. it was also our 12th consecutive quarter of record earnings, and, you know, our earnings at $105 a share were up 14% year over year, and we were able to achieve those results on just the fundamentals of our business. we focused on our customers and we would grow loans, up 4% year over yore. grew goes deposits up 6% year over year and focused on oh, --
on expenses and obviously our secar plan was not objected to and we plan to purchase more of our shares. >> tim, a lot of people are going to be looking through and comparing your results with jpmorgan's, and i wonder if you would describe the improvement in the loan conditions, lending conditions that you see as more of a pull or a push. in other words, are you seeing customers, whether they are corporates or, you know, individuals demanding more in terms of resources, or are you pushing your workforce to be more productive and to take share from some of your competitors? >> oh, i think it's definitely a mix. i mean, if you look at our loan growth which was $4.1 billion in the first quarter, that was up compared to last year and last year our growth was a little under $400 million, so clearly conditions are a bit better.
the first quarter tends to be a seasonally lower quarter for the industry, but what was exciting for us is how broad-based the loan growth was. it was in our corporate banking group, our asset-backed finance group, government and institutional finance group, growth mortgages within our wealth management and retirement group. it was in our credit card business. it was in auto, so year over year it was up across the board and that to us indicates that the economy continues to slowly but surely increase, but it also means we're taking shares from our competitors. >> yeah, slowly but surely for a lot of impatient people out there is not good enough. can you give us a breakdown of the residential versus commercial. anecdotally we're hearing that commercial is doing a lot better than residential real estate right now. are you seeing that as well? >> well, commercial real estate values are clearly at high points in some markets, even higher than the high end of the last cycle. >> is lending going up as well? >> oh, yes, absolutely.
and we saw growth in our commercial real estate group, not only in terms of new loans, but also for construction loans, so that was good. on the residential side, the -- the mortgages that we originated for sale were down around $14 billion from the fourth quarter, but we ended the quarter with a stronger pipeline. it was up $2 billion when we started the quarter, and we're able to grow the nonbalance sheet conforming business nicely into the quarter. >> i want to ask what we're seeing in the rate space. 309-year is below 3.5% and the ten-year note, a benchmark for so much activity, as you know, has come down considerably for this year as well. is it for structurally lower rate, and if so wharks does that mean for your business? >> well, it's a great question, an, boy, i wish i knew the answer to it. i think one of the things we know at wells fargo is nobody knows where rates are going to go. it seems like the economy is improving, but as bill
mentioned, it's improving more slowly than we would like in that environment. i think it's more likely that rates are going to go up than go down, but they are going to be very volatile on their way up, both at long end and the short end. >> i mean, i don't mean to be mocking it, but the only direction for rates to go is up, isn't, it especially since the fed is doing the taper right now. they are pulling back on their easy money policies slowly. >> oh, don't feel like you're mocking me at all, bill. we think that rates are going to go up, but we thought that when the ten-year was at 280 and 290, too. >> exactly. >> i think we'll see a fair amount of volatility. need to be prepared for that, and we've got to be there for our customers because we've got to help them through this kind of period, and our results this quarter demonstrate that we're able to do that. >> is the refi market dead? >> no, i don't think it's dead. about 40% of the mortgages that we originated are in our pipeline this quarter, so that's
40% of about $36 billion, plus or minus. >> really. >> our refinancing opportunities, that will continue on, but the complexion has really changed. it's primarily going to be a purchase money-driven mark. that's about 60% or maybe even a little bit more than that of our new original nations, and we're looking forward to a stronger spring buying season and the summer buying season than what we saw in the win thor. >> tim, when is john stone's birthday? >> sometime in september. i can't recall the exact day, probably will get in trouble for not knowing. some day in september. >> i didn't know how closely you were watching the day he turns 65. >> oh, i get it. >> i'm sure we'll have to get him a good gift for certain. john's got a lot of runway left. he's a very active ceo. gives me instructions every morning and gives a lot of us intruckses every morning. he's a terrific leader, and he's going to be ceo of this company
subject to the board who think the world of him for the next 4.5 years. >> boy, are you sneaky. >> and we'll just see who comes after him. >> yes, indeed. >> tim, great to see you this afternoon. >> we'll talk to you again sometime. good luck with the new job. >> you will. good seeing you both. >> thank you. >> tim sloan, currently the cfo of wells fargo, soon to run their wholesale banking business middle of may. >> fascinating day in the banking space. >> coming back. >> a little bit. >> 35 minutes to go, and as bill just said that the dow is just off 84 points. >> show us the heat map. this is the nasdaq 100, all 100 components, not all are red today. we've got almost a full row of green right now. we'll go live to the nasdaq market site for a check how the battered biotechs and other momentum names are close out this week. >> plus, get out your notebooks, two of wall street's top pickers will give us a peek of their shopping lists. what are they doing amid this
...who work with portfolio management experts, that's when expertise happens. mfs. because there is no expertise without collaboration. without standard leather. you are feeling exhilarated with front-wheel drive. you are feeling powerful with a 4-cylinder engine. [ male announcer ] open your eyes...
to the 6-cylinder, 8-speed lexus gs. with more standard horsepower than any of its german competitors. this is a wake-up call. ♪ welcome back. stocks are seeing losses across the board as we head into the close. >> yeah. we're watching the nasdaq very carefully. seema mode has been tracking the action there all day.
seema? >> reporter: bill, that's right. the nasdaq here down 1%. the selling pressure intensifying as we close out end of the trading week, down about 1% on the day, but just stepping back for a second. it has been a tough couple of weeks for the nasdaq, now down about 8% from hitting its 14-year high back in early march, so getting really close to entering correction territory. morgan stanley came out with an interesting note this morning, identifying six other time periods where the nasdaq has significantly underperformed the markets over the last 15 years, and they found that large-cap names like hp and ibm, not only bucked the downward trend but outperformed during these time periods so the debate whether one should invest in new tech or old tech. when the market sectionceptionly volatile, it brings investors back to the fundamental story. earnings, evaluation, two factors being watched very closely by markets participant. in fact, i was speaking to one analyst who said if these momentum names mysteried
expectations this earnings season in what has already been a fragile training environment, there could be more carnage to come. back over to you. >> seema thank you very much. plenty of money managers who have come through here are saying this selloff is a buying opportunity, so we've called in a couple of them to tell us what stocks they should be buying right now. it's great to see you both. michael, looking at selloff today, does that make you more eager to get into this market or to just some selective names? >> i'm always a buyer, but i'm always buying selective names. i mean, i think you really have to do your homework in every market, but this one now has kind of been swinging my way. i've been calling for folks to buy defensive companies, with strong balance sheets and good dividend and good earnings, so this is kind of where i think people should have been for a while and i don't think it's too
late. a name like johnson & johnson, for instance, ten years of 10% compound earnings growth. stocks selling at 16 times earnings. 8% to 10% growth rate going forward so if you keep the pe kind of normal and you get 7%, 8%, a aaa balance sheet. i mean, that's the kind of company i want to own. >> rob what, but? >> first of all, is this a buying opportunity as we're saying here, as we've declined, or would you wait for a bigger decline before you get in? >> well, i think you've got to definitely get your shopping list red, and i think you should start buying right now. i think there are great opportunities, particularly of the leaders, and at areas we're focusing on would be clean technology, the alternative energy area, and in that area i like solar city, the fastest growing company in the solar area and solar is being driven by something really novel, economics. you can actually get a wonderful
rate of return today. if you live in a state like massachusetts, california, those states with investment tax credit, you did get to a rate of 20% return. >> you wouldn't have gotten that if you bought them in march. >> well, hey, it's a volatile space, there's no doubt about that, and these are not inexpensi inexpensive. my companies grow a little bit faster. >> the reason why i say that actually, and i'm curious to hear you mention these names because more people are doing what michael farr just suggested, trying to look for the plays you can talk about more reliable earnings growth. why do you recommend that people look and take a gamble to some extent on a name like solar city beyond, and i understand the story, the longer-term story you're talking about, but even in these markets here. >> this is the reason that you get the opportunities. i wouldn't have been founding the table two months ago for solar city or gte advanced technologies, but today with them being down 25% and 30% and
still growing at 75% you have to look at these opportunities. >> michael, you've got qualcomm and abbott labs on your list. still, would you have been pounding the table on these as much two months ago? >> i was -- i've owned them certainly, bill, for that period, and, yes, i probably would have been a buyer. i like to be a more opportunistic buyer, but with the ball sheets of these companies, with the free cash flow and dividends, you know, part of my job as a money manager is to make sure that my clients have a chair when the music stops, and certainly you look for opportunities as my colleagues are suggesting in some of those names perhaps at times, but these are the kind of companies that get you through tough markets. qualcomm selling at 15 times earnings, growing at around 15% with a 2.2% dividend. abbott labs, great company, 16.5
times earnings, going to grow double digits, i don't think the s&p will, and 2.3% dividend when the ten-year treasury is yielding 2.67%. why not only aaa balance sheet in johnson & johnson. i'm a big fan of getting rich slowly >> in a worked you guy, we've got to go. are boast of you or either one of you seeing clients sell for tax purposes? >> michael? >> a little bit of cash rage on the edges, but i -- i think, you know, you've got to keep in mind, too, markets go up and down. no reason to panic. just not used to markets going down. >> rob, does this have anything to do with tax season, some of the weakness here, do you think? >> i think it clearly does. lots of our clients have been calling in and asking for money. we're fairly fully invested so you usually need to sell something to raise cash. >> thank you. >> after the 15th we could really have a real here. >> appreciate it. we'll continue that discussion next hour. leave it there for now. >> heading towards the close, 25 minutes left in the trading session here with the dow heading lower again, down 120
points. the nasdaq holding right at that 4000 level that art cashin has been talking about, though he lowered the bar to 3995 or something like that. >> coming, such investors be anti-social when it comes to certain media stocks? facebook, linkedin, twitter, which ones to include in your portfolio. >> and more on these new documents that are being released right now that suggest gm ceo mary barra may have known about car issues even after telling congress that she didn't. a timetable is being moved back is what's going on with these documents. we'll have the latest details on the crisis at gm coming up. t gmo c , but there are no branches? 24/7. i'm sorry, i'm just really reluctant to try new things.
really? what's wrong with trying new things? look! mommy's new vacuum! (cat screech) you feel that in your muscles? i do... drink water. it's a long story. well, not having branches let's us give you great rates and service. i'd like that. a new way to bank. a better way to save. ally bank. your money needs an ally. ♪ i ♪ and i got the tools ira ♪ to do it my way ♪ i got a lock on equities
4000. below that 3995 and 3990 would be a number you don't want to breach on the close today because it could auger more selling. right now the dow 140 14, nasdaq down 50 and s&p down 13. >> if you add this to what happened, yesterday we were down 3.25, so at this moment we've lost 4.5% of that index in the span of two days. new details emerging in gm's recall crisis meantime suggesting ceo mary barra may have known more about car problems than she told congress just last week. >> phil lebeau has been going through the documents they have been release what. are you finding and how much double do you think she's in now? >>. >> reporter: it depends on what she says about this e-mail that we have -- that we are looking at right now. it was sent in october of 2011, and we'll give you some context about the e-mail. basically summarizing that there was a "new york times" or the call looking at the issues of steering problems involving
about 380,000 saturn ions, a vehicle later included in the recall of 2.6 million vehicles so there was an e-mail sent summarizing all of this. it was then sent from one of the engineers who was on the list to mary barra and here's what the e-mail says. it says, mary, during the initial cobalt case, the ion data did not justify being included. the situation has been evolving. we will meet and understand the latest data. there is no e-mail back from mary barra. no indication that she read this said great, understand, let's talk about it some more. in other words, there's no indication based on these documents that we know that mary barra, a, read the e-mail and, b, had some point of view about the situation involving the ion and the cobalt, but it is clear that back in 2011 this issue, at least tangentially was brought to her attention, and, again, that's from october of 2011. that's the one that's going to get a lot of attention, guys, as we look through all of these
documents. the other one that really stood out to us is back in 2005 it was pretty clear. they knew almost immediately there was a problem involving the ignition switches. in fact, in an e-mail from one of the engineers to other engineers, two statements stand out, the first one being that as the vse of the cobalt launch, i was very aware of the issue of inadvertent ignition ofz due to the low-mount ignition switch in the steering column and the low efforts required to rotate the ignition. the very next sentence he discusses the pros and cons of changing the ignition switch, and he said the con is it will cost about 90 cents per switch to change, require $400,000 in tooling and add 500,000 in volume. it's very clear in these e-mails and documents that the cost issue came up early on. >> phil, thank you. thank you, phil, very much. we want to bring in alec gutierrez, senior market analyst for kell blue book to talk more about this breaking news. >> i'm curious to some extent,
this is a huge deep troubling problem at general motors, unprecedented almost. where were the consumer reports, for example, and all of the other, you know, evaluators here for the last decade. why is this all coming to light now? >> yeah. i think it's a great question. we know that this stretches back more than a decade and was widespread. a lot of knowledge within gm, certainly with the two engineers that were already suspended and clearly this goose at a much higher level. what it sounds like is that gm wasn't as forthcoming as they should have been in terms of the scope of the problem that they knew about, and -- >> the sound may have frozen there. just making the point, bill, as well. in these documents people are talking about how expensive these fixes would have been, and it's only in the tens of millions and for the individual parts it's less than $10. >> alec, you back with us now.
>> yes. >> we loust there. i don't know, we've been having gremlins in the system lately. do we just blame the -- the need for profitability to keep costs down, the fix was going to cost too much so they needed to find other ways or just completely ignore it? is that really what was going on at gm over the last decade? >> that's really what it looks lying. it looks like it came down to dollars and cents which to me there's no excuse for. if you're talking about something like say your electric power windows, if there's costs related to fixing that, okay, that's a different question, but when you talk about something like the vehicle turning off at highway speeds, regardless of the cost, this is something that needs to be addressed right away and brought to the attention of the proper regulators. >> i guarantee you, if they told every single driver of a cobalt that they had a bad ignition switch and it would cost the driver $1 to fix this thing they would come back and fix the
thing. why wouldn't gm do it that way necessarily? >> you better believe it, and i think what it must have come down to is although you can tell consumers, you have to come in and spend a dollar, $2 to get that fixed that doesn't alleviate them of every liability in case someone were to miss the message, not get the e-mail or letter so if there was still an accident they would still likely be liable and that's where it comes down to being on gm's shoulders to make the call and take the expense. >> a lot of moving pieces and breaking news. the gm share decline not helping broader markets. the seydou off 100 point, the nasdaq is off 43, and we've got about 15 minutes here to go into the close. >> we'll take a quick break and come back. the nasdaq the big loser of the week. as you can see on our heat maps, still lots of red along the components of the nasdaq 100. back after this. back after this. and what they've been through lately. polar vortexes, road construction, and gaping potholes.
so with all that behind you, you might want to make sure you're safe and in control. ford technicians are ready to find the right tires for your vehicle. get up to $120 in mail-in rebates on four select tires when you use the ford service credit card at the big tire event. see what the ford experts think about your tires. at your ford dealer. afghanistan, in 2009. orbiting the moon in 1971. [ male announcer ] once it's earned, usaa auto insurance
is often handed down from generation to generation. because it offers a superior level of protection. and because usaa's commitment to serve current and former military members and their families is without equal. begin your legacy. get an auto insurance quote. usaa. we know what it means to serve. you stand behind what you say. there's a saying around here, around here you don't make excuses. you make commitments. and when you can't live up to them, you own up, and make it right. some people think the kind of accountability that thrives on so many streets in this country has gone missing in the places where it's needed most. but i know you'll still find it when you know where to look. gundyes!n group is a go. not just a start up. an upstart. gotta get going. gotta be good. good? good. growth is the goal. how do we do that?
i talked to ups. they'll help us out. new technology. smart advice. we focus on the business and they take care of the logistics. ups? good going. we get good. that's great. great. great. great. great. great. great. great. great. (all) great! i love logistics. welcome back, some breaking news on herbalife. >> shares are down 11%, 12% toward session lows in trading today, this on the heels of a "financial times" report saying this a criminal probe has been launched with regard to herbalife, the story citing close sources familiar with the
matter that says the department of justice and the fbi are investigating herbalife. again, this criminal investigation, according to a report by "the financial times" citing people familiar with the matter. also important to note that this inquiry may not lead to any charges and herbalife has not yet been accused of any wrongdoing, so this is taking down shares to 12% to the downside for this company. also look at fellow multi-level marketing companies newskin, nothing with news there, but it's moving in sympathy to the downside, down about 4% as well so keep an eye on hlf and hlf as we approach the closing pebble. >> add those to the names deeply in the red. herbalife say they have no knowledge of any ongoing investigation by the doj or fbi so we'll watch it closely. >> heading towards the close. 12 minutes left in the trading session with the dow down 120
point, found some stability at that level and nasdaq still holding above 4000 right now. >> but barely. >> but barely. >> after the bell, find out how much, and this is an important discussion as well, how much the april 15th tax deadline has to do with this week's selloff. a contentious issue. we'll be right back. capital to make it happen? without the thinking that makes it real? what's a vision without the expertise to execute it... and the financing to make it grow? whatever your goal, it can change more than your business. it can change the future. that's why, at barclays, our ambition is to always realize yours. ameriprise asked people a simple question: in retirement, will you outlive your money? uhhh. no, that can't happen. that's the thing, you don't know how long it has to last. everyone has retirement questions.
so ameriprise created the exclusive.. confident retirement approach. now you and your ameripise advisor can get the real answers you need. well, knowing gives you confidence. start building your confident retirement today. salesgets up to 795 highwayal is the passamiles per tank.sel salesperson #2: actually, we're throwing in a $1,000 fuel reward card. we've never done that. that's why there's never been a better time to buy a passat tdi clean diesel. husband: so it's like two deals in one? salesperson #2: exactly. avo: during the first ever volkswagen tdi clean diesel event, get a great deal on a passat tdi, that gets up to 795 highway miles per tank. and get a $1,000 fuel reward card. it's like two deals in one. hurry in and get a $1,000 fuel reward card and 0.9% apr for 60 months on tdi models.
two pretzels. put in on my capital one venture card. i earn unlimited double miles. not bad. can i get your autograph mr. barkley? sure kid. man my fans they love me. that's the price you pay for being world famous. he meant sign the receipt, fool. greg anthony. haha. hey man, could you sign my hat? he wants my autograph. earn unlimited double miles with no blackout dates from the capital one venture card. what's in your wallet?
welcome back. about eight minutes left in the trading session, and we are going to watch, you know, art cashin was saying this is an eternity to the close. we'll watch very carefully the last few minutes to see the levels where the markets can finish. the dow at 16,034. doesn't look like we'll finish below 16,000, famous last words, but the nasdaq is the one we're really watching, down 53 points right now, right at 4000, david darst, senior investment consultant joining us. >> bill, it's been a very interesting week where we're flushing out a lot of toxins from the system. >> getting rid. we cans. >> are we having a recession, no, is the fed tightening? no. they said they would keep interest rate low. is investor euphoria present?
the banks and the transportation and the russell 2000 stocks have akuwaited themselves okay, not great, but they are hanging in there, so our feeling, is we said to you week after week, let the markets settle down and come down. this first quarter is not going to be anything to write home about on the profits. let the markets sell off and then put some money to work again. >> we've seen a mixture in the profit picture. >> so far 29 companies have reported. >> it's very early. >> for example, today, jpmorgan, a decline of 19% in their profitability whereas wells fargo was up 14% so it depends on the company. >> it depends on the company, right? >> very stock specific right now, very idiosyncratic and heterogenous, you'll have wheeling that fall short and others will be okay. >> art cashin following the levels to keep an eye on. as he said, anything below 3995 on the nasdaq on the close, we could see more selling next week. do you watch levels like that?
i mean, what are you doing here? >> i think barton biggs. >> great man, used to say he was never a technician but secretly did look at the chart. >> we're all technicians. >> you broke it down below the 50-day moving average so you'll see other technician followers put pressure on the market if it does break below that. again, another reason to be cautious. take your time and use discretion and be disciplined and exercise caution right here. that's our message. >> david and i will come back with the closing count down. we'll see if we can close above those levels. right now that nasdaq is right at the 4000 level, and after the bell a major trend shift in corporate earnings versus revenue growth and what that could mean for wall street and your money coming up. you're watching cnbc, first in business worldwide. siness world. ♪ aflac, aflac, aflac! ♪ [ both sigh ] ♪ ugh! ♪ you told me he was good, dude.
yeah he stinks at golf. but he was great at getting my claim paid fast. how fast? mine got paid in 4 days. wow. that's awesome. is that legal? big fat no. [ male announcer ] find out how fast aflac can pay you at aflac.com. [ male announcer ] find out how fast aflac can pay you maestro of project management. baron of the build-out. you need a permit... to be this awesome. and you...rent from national. because only national lets you choose any car in the aisle... and go. and only national is ranked highest in car rental customer satisfaction by j.d. power. (aaron) purrrfect. (vo) meee-ow, business pro. meee-ow. go national. go like a pro.
[ tires screech ] chewley's finds itself in a sticky situation today after recalling its new gum. [ male announcer ] stick it to the market before you get stuck. get the most extensive charting wherever you are with the mobile trader app from td ameritrade. three minutes lev. art cashin was just telling us, he walked by, $1.9 billion for sale of stock going into the close here. that could mean a little more selling as we head towards the close here. the dow -- this is the week for the dow, ant selling has really intensified yesterday as we all know and has continued today. for the week the dow is down 2.25%, but the nasdaq is the one that's really taking it on the chin, down almost 3% for the week, and today we're watching that 4000 level pretty carefully right here.
we're at 4004 at the movement where's the money been going in the treasury market, the yield on the ten-year has collapsed this week. we're down to 2.61%, and in percentage terms that decline is about 4%. also, we're just talking here during the break, the fear indicator, the vix, has gone up, yes, but not a whole lot. it's up 23% which sounds like a heck of a lot and the level is at 17 and bob pisani joins david darst. >> when the vix is slow you've got to go slow. you just said it a moment ago, above 20. >> rapping on us a bit. >> there you go. >> the vix is above 20, don't pay a lot of attention to it. >> we're heading there. >> the tax issue, i've been getting inquiries all week of we can't quantify how much the taxes affect things, but here's something from tom mcclellan. a lot of investors last year did not figure their quarterly estimated tax payment, the extra
0.9% medicare tax or the extra 3.8% investment return tax, and they will have to write a big check on april 15. you can't quantify it, but i think it is somehow playing into this. >> there's got to be something to that. the timing is just too strong, right? >> this coming week you've got retail sales, industrial producti production, empire set, fed, housing, a lot of indicators and people will ignore them -- >> i was just going to say will it matter because the market ignored the better than expected jobless claims number yesterday, decent reports this morning on the economy and we're still down. >> so far we'll have to wait more for the earnings season to give us a clear indication on what the second quarter is going to look like. we'll need to get a gdp pickup. we don't get 3% gdp by the third quarter, then we'll have some problems. >> do the to see it higher. >> happy passover and easter to everybody. >> there you go. if we don't see you next week.
thank you, everybody. see you later. going out. see if the nasdaq can hold above 4000, still a couple minutes to keep an eye on that with the dow down 2.25% for the week. that's the first hour of "closing bell." stay tuned. we'll get you set for the next week on the second hour of "the bell" with kelly evans and company. >> welcome to the "closing bell" on this friday as we kick out a volatile week and ending on a tough note. here's how we're finishing the up the session on wall street. a deep decline across the major markets. take a look at the major index hess here, we're finishing off -- bradley, bradley. all right. can anybody read these charts for me. off 140 points for me on the dow jones industrial average. the nasdaq looks like it's closing below 4,000. the s&p 500 is giving up 17 points to 1815. let's bring in our panel, phil orlando, sharon epperson, jeff
cox is here, kayla tausche and with us for more on today's markets is "fast money" trader tim seymour. fill orlando your first time here. why don't you start us off with a sense of what in the world is going on in these markets. >> markets are scared to death. you've got a number of fundamental concerns in terms of weather, whether or not the weather issue in terms of first-quarter earnings and gdp growth, i think investors are willing to look through the first quarter, but i think there's concern about what will happen in the second quarter. do we bounce back. geopolitical concerns, and all of that is catching up with these high-growth stocks in technology and internet technology. >> kayla, is this all jpmorgan's fault? >> i don't think we can blame jpmorgan because actually jpmorgan was the biggest laggard on the dow yesterday even before it issued its earnings, but what you do see in the banks with wells being up today, you see the backdrop of a relatively weak economy, everyone expected loans to be bert and corporates doing more this quarter and they
weren't. also, wells fargo got a benefit of releasing $500 million from its reserves so that added a lift that many analysts didn't expect but a surprise to the upside. jpmorgan did have a couple of specific lines but this is just a weak economy. >> tim seymour, 3.5 misin the 30-year, what's that telling us? >> it tells you that bonds were overreacting to the fed comments of two weeks ago, and i don't think the economy is in a bad place at all. look at the jobless claims yesterday, may 2007 levels and look at consumer confidence and the workweek and look at the consumer who is really in as good of a place as a long time. ultimately this is very good for banks and the weakness you're seeing in jpmorgan is something i think is partially just expectations coming into this quarter which were very low. expectations have been managed, and this isn't the case with jpmorgan. it's the case with a lot of the
rest of the markets, certainly the nasdaq. rotation from growth into value. that's all this is, and i think people need to rell lies markets don't crash when you have such low leverage by hedge funds. >> had this conversation yesterday. i don't disagree that the banks have played their bet a little too early. there's no demand for consumer loans. consumers aren't putting more money on their credit cards, only slightly. >> auto sales at 16.4 million annualized. looking at where we are in terms of the banks on valuations, again in, a cyclical upswing which i think we're in you want to buy banks and want to buy banks because of all the big sectors to own, 1.2 times price to tangible book to sector is not expandible. on a historical that's certainly quite inexpensive. >> you were going to say? >> look at the broader picture here, taking financials asite. look at where the market, is yes, over the last couple of days, not great days, but lock
at where we are over 12 months. double digit returns so for those investors sticking here for the long haul and know we'll see a lot of volatility, we won't likely see the gains we've seen in the past year, but we'll continue to see some growth and there's positive signs out there. we're at the end of the tax season with tax refunds up 9%, $18 billion. >> look at the deficit yesterday. >> going back to the taxpayer, so maybe some of that money once folks pay down their debt and save a little bit will come back into the market. >> let's give people a sense of what's just happened in the market with our hat tipped to the data team. looking at the worst week for the nasdaq and s&p since june of 2012, the longest weekly losing streak for the ibb which jokingly we were calling the new vix until the vix started popping, off seven straight weeks and seven consecutive weeks of losses for the first time since its inception in 2001. health care, we talked about what's happening with regard to theins ifs.
consumer discretionary also taking it on the chin and industrials of a 3%. only industrials in the green. >> we can have all the high-minded discussions that we want about data points and some of the other things. what i like to do is just watch the tape, and the tape is telling you something. the tape is telling you that this market has been priming itself for a pullback for quite some time now, and i think when you get to that point, it doesn't take a lot. it takes a little push here and there. now absent a recession or anything like that, i don't think that this becomes something that gets really out of hand, but you can really get -- we're talking about momentum, right? those are the momentum stocks. they catch a fever. the rest of the market catches the flu and we end up in a place where -- >> mentioned utility, tim, but suddenly emerging markets, suddenly people are piling back in. >> look at emerging markets 22 straight weeks of outflows. this to me is the ultimate value trade and it's a momentum trade that at least in other words had been so negative on the downside. are you seeing a rebound in
emerging. look at the eem in the proxy, could you probably trade this thing back to 4475. i don't think you do it overnight, but trade to watch is, really, again, a reverse in the mean trade is the eem against the spi is something that for 3.5 years kept getting sold and sold and sold, and this is a spread that started to move. won't happen overnight, but i think you have to watch that. >> want to go back to this tax questioned. we had a guest saying he thinks this is tax related and that we'll get a real come april 15th or 16th or what have you. do you buy that? are you seeing that firsthand, and if that's the case wouldn't be the market be discounting it now? it seems as though the selling action seems to be unrelated to that known entity that's out there. >> you can't -- you can't discount the fact that stocks have done very well here so you've got individuals with a lot of profits. some of the banks and pretty decent bonuses. the tax rates went up, the deductions came down, there are tax bills due, the tax bills
have to be paid so some of this liquidity over the last five weeks from selling may be related to taxes. >> we have tax day every april, right? >> yeah. >> and if april is the best month for the market, isn't it? >> what makes this april so much different? >> what is made so much different because the rates have gone up, there's a new tax on investment income that a lot of folks making $200,000 weren't anticipating that they would have to pay more and would not be able to get the same kind of deductions that they have had in previous years so that shocked them. look at the broader picture, as i mentioned. overall tax refunds have gone up significantly, so when you look at the broad scope of americans, they are getting money back, more money back than ever before and if they are able to pay down their debt, maybe they can save a little bit and put money back into the markets. >> one. reasons why the deficits are narrowing substantially, something nobody is talking about. it could perhaps support the u.s. dollar or interest rates here but it goes back to some of the wackiness in the markets,
completely uncorrelated moves, and if you told me that the week in which jobless claims fell to 300,000 for the first time, a seven-year low, that that would be the week that the 30-year bond fell below 3.5%, i'd frankly be stunned. thoughts here? >> well, kell, from my perspective, let me jump in here, looking at what's going on in the labor market, that's telling us that this decline that we've seen in gdp in the first and fourth quarter is probably not sustainable. probably seen a significant pickup in growth starting in the second quarter now that we've got normalized weather and this will probably be short lived. >> if you look at the ism, probably 3% to 4% growth year over year. the economy to me is mid-cycle at this point, and if you look at other parts of trades that are, would go right now include energy. if you're long energy and short tech have i you're laughing. this is a trade that continues to work and look at industrial metals prices, nickel at one-year highs.
some of these trades continue to work and tells you the economy is better, and there's real demand. >> that's what's so quirk beit though. >> we're quirky. >> yeah, i know, the point though being that, look, it's not as if -- we've seen these periods in the past, right? when the fed would try to end qe and what would happen? correlations would go to one? we'd see the flight to safety move? it's not behaving the same way this time, and it comes back to this issue of whether, you know, who to pay attention to in this market, do you pay attention to what's happening with the ten-year and 30 year and bond marks. >> you better. >> or what's happening in japan. >> or do you pay attention to the credit market and pig toggle bonds that are price will all at the same time, jeff? >> i always follow the credit markets. i think the bond guys get it right more often than the equity guys, no offense to any guys around here, but i do think the economic question is the big question and how does the fed react to that? does this become part of the fed discussion? is it too soon? i think before this year ends the fed at least pauses in
question and says, hey, wait, maybe we've moved a little bit too fast and got too enthusiastic. >> you think they are going to pause. >> that kills their credibility? what credibility do they have? i mean, they just stepped away from their 6.5% unemployment rate projection, already told us that forward guidance -- >> because unemployment is -- >> set benchmarks that are not relevant. who would even listen to the fed. >> you better listen to the fed. >> i think you want to watch what the fed does, but i don't think you want to listen to what they say. >> the reason the fed stepped away from 6.5% is because of the quality of the unemployment, the participation rate. that i think was just a realization of what's going on in the labor market. >> in other words, how would you describe the fed's credibility with markets here? >> i think the fed's got a lot of credibility, and one thing we'll see, yellen is coming to new york to speak to us next week. i think that's going to be an important meeting because she will be able to potentially clarify some of the uncertainties that we see right
now in the marketplace vis-a-vis what fed policy looks like. >> if you were to take the two most recent things, janet yellen's defense of cyclical unemployment, if you will, the most dovish speech she heard, was one of how our guests put it and then the minutes that showed no one was talking about really any kind of six-month language. those two pieces of information should have given a bid, if anything -- >> labor participation has been on the decline for several years. do janet yellen and the rest of the fed realize now we're having a problem with labor force participation? did they just realize that structural unemployment is not going away? i don't buy that. i think they have been behind the curve ever since the crisis started, and they continue to not understand some of the dynamics that are underscoring the economy. >> we'll leave it there for now. tim, thank you. thanks, everybody. catch tim seymour coming up with the rest of the "fast money" crew here at 5:00 p.m. now, stocks selling off again today. jeff cox spotted a major red flag this earnings season that could spell even more trouble ahead. we'll talk about that right
after a short break. also, herbalife shares are plunging on reports that the justice department has opened a criminal investigation into the economy. has activist investor bill ackman been right all along? herb greenberg joins us. hear what he has to say. you're watching cnbc, first in business worldwide. siness world. we route your order to up to 75 market centers to look for the best possible price, maybe even better than you expected. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. call or click to open your fidelity account today. i just ah woke up today and i said i need something sportier. annnd done. ok maxwell, just need to ah contact your insurance company with the vin number. oh, i just did it. with my geico app. vin # is up to the loaded. ok well then jerry here will take you through all of the features then. why don't weeeeeeeeeeee
put it on my capital one i earn unlimited double miles. hey, you're not the charles barkley? yes i am. nah charles barkley is way taller. there's my picture on the wall. yeah that could be anyone. what about my jersey over there? oh yeah, that's your jersey. there's my bobble head right behind you. alright well let me see you bobble. yeah, i'm just not buying it man. earn unlimited double miles with no blackout dates from the capital one venture card. my brother john, he works here. john, you know this guy? what's in your wallet?
welcome back. talk about april showers for this mark. the dow and s&p 500 down around 2%, the nasdaq down more than 4% this week. dominic chu is breaking down the stocks already in bear market territory and which ones are weathering the storm, dom? >> you're abslooly right. a tale of two different stock markets which makes some people feel better because picking stocks, the right ones, does matter. no sense of real panic. check out a couple of names on the bear side of things, big ferocious grizzly bear, a company like staples has dropped 31% from its high back on august 13-of-the-2013, so a very bearish move to the downside for this office supply retailer. now take a look at another name. not quite related by still one of those consumerish types name, dreamworks animation, animated features are their thing and down 25% from recent highs and
that was just back in december. bear market moves for these stocks. you take a look at other names. not all stocks traded equal. bigger large-cap names have actually held up quite well in this perhaps rollish tight market. caterpillar, heavy industrial equipment making, up 1.4 some of the recent highs here so they have held up remarkably well in this market. one more for good measure. not quite bullish but big lots. as much as we've been talking about downed retailers, big lots on the dollar side of thing is actually up 2% from near its recent highs, again, a lot of stocks really come down to whether or not there's a fundamental story in this kind of economy for them to do well, and that's one of the main reasons why they still say, kelly, do your homework, stock picking matters. jim kaimer would always say do your homework, right, kelly in. >> always a bull market somewhere. thanks, dom. earnings season will be in full swing at next week.
cnbc's.com jeff cox seeing a red flag with regard to the fundamentals, what's that, jeff? >> under normal circumstances, what we've been looking for for earnings over the past two years now, is to see top line revenue growth that shows that demand is returning and actually companies are no longer having to cut costs to reach their profit goals. now the first quarter is actually indicating that profits are actually supposed to grow at a farther pace than -- >> you mean revenues are going to grow faster. >> yeah, revenues will grow faster than bottom line profit. the numbers are about ex-financials revenues to grow 3% earnings per share, actually supposed to fall a little bi. the big problem that you have here with this is that it's making a bet on consumer, companies will be able to make that handoff to the consumer for demand, and i'm just not sure if that demand is there now. it's the expectations game. >> if we take these numbers at face value, it tells you a better sign, revenues will
increase even though earnings are under pressure. what you're saying is the expectations are so high that we'll see this top line growth. >> yeah. >> phil, do you see areas of vulnerability in any of the sectors in particular. consumer discretionary, 12% increase. that looks pretty hefty. >> the revenue gains are supposed to be a little bit better than the earnings gains and rather than break it into secretary ork the bigger question is the implied reduction in profit margins that this is pouring through for the first time. we saw this sort of being qued up, third quarter into fourth quarter of last year. productivity data started to slow. unit labor cost started to go up and the reason for that is the labor market is starting to improve. bringing new workers in. you'll lose some of your pro --tivity and costs will go up. that will hurt profitability, and at least based upon the expectations, that trend is supposed to continue into the first quarter. >> let me ask you this. sharon, wouldn't it be a good thing, if you wanted to see, for example, pressure on profit
margins, if you saw earnings because companies were paying higher wages or because they were doing more cap-x, is this the right kind of pressure or the wrong kind? >> back to me. >> oh, sure. >> we, i think you're better to answer this, but i don't think it's because of higher earnings or higher wages, necessarily, thatty we are seeing this pressure. when you look at particularly what struck me is the numbers in the energy sector and the fact that we're seeing lower earnings and lower revenues and earnings growth continues to be ratcheted down, chevron saying they expected earnings to be lower than they anticipated, all a factor, those are things that we need to look at some of the sectors phil said to look tat it more broadly because some of the sectors like energy may be skewing the picture. >> we've been saying for the last year profit margins had peaked and nowhere to go but down as companies started deploying for cap d.a. x, buying deals and we haven't seen that. every quarter has seemed to be a new peak for profit margins.
people have been waiting around for that to start correcting. >> as much as they are waiting around for waits to go up. calling into question some of the mean reversion things we've not keen seen. jeff quick, last word? >> it kind of squares the circle. which direction are we headed in? will we see more organic growth and that margin expansion sickle. a lot of people are starting to question that and i think that's why you see more volatility coming into the record. >> more with some of the details on this big mover. >> we do have a response from the "f.t." article, the company saying we have no knowledge of any ongoing investigation by the doj or fbi. we've not received any formal request from either agency. the company says they take their public disclosure object gags very seriously and don't intend to have additional comments. the company is saying no knowledge of any ongoing
investigation by the doj or fbi. herbalife shares are rebounding 2% in the after hour. remember, it fell 14% after that article was released. >> sheila which is a little bit crazy because the "ft" story included that same line that herbalife had no knowledge. clearly investors are trying to make sense of that. heard a lot about stock prices being fosty. my next guest says the boom in bond prices this year has been nuts. why the hunt for yield is spelling trouble ahead for credit markets, and senator richard blumenthal reacting to news that ceo mary barra may have known about the company's car problems even after she told congress she was unaware of them. that's coming up as well. we'll be right back. tdd# 1-888-628-2419 searching for trade ideas that spark your curiosity
tdd# 1-888-628-2419 n take you in many directions. d# 1-888-628-2419 you read this. watch that. tdd# 1-888-628-2419 you look for what's next. tdd# 1-888-628-2419 at schwab, we can help turn inspiration into action tdd# 1-888-628-2419 boost your trading iq with the help of tdd# 1-888-628-2419 our live online workshops tdd# 1-888-628-2419 like identifying market trends. tdd# 1-888-628-2419 now, earn 300 commission-free online trades. call 1-888-628-2419 or go to schwab.com/trading to learn how. tdd# 1-888-628-2419 sharpen your instincts with market insight from schwab tdd# 1-888-628-2419 experts like liz ann sonders and randy frederick. tdd# 1-888-628-2419 get support and talk through your ideas with our tdd# 1-888-628-2419 trading specialists. tdd# 1-888-628-2419 all with no trade minimum. and only $8.95 a trade. d# 1-888-628-2419 open an account and earn 300 commission-free online trades. call 1-888-628-2419 to learn more.
tdd# 1-888-628-2419 so you can take charge of your trading. seems like earningor everybody is on the under for yields. what about the next direction for stocks? larry mcdonald joins us and also brian reynolds. it's great to have you both here on the floor. brian, just joking. what volatility? >> in the credit market last two days junk yields have been coming down, people buying high yield as equity investors selling like crazy. >> is that because we've seen the five-year coming down. >> hasn't mattered whether rates have gone up or down in the last five years. our nation's pensions need to make 5.7%. need to bring in more money from
the cities and towns that fund them. >> perhaps no coincidence that back stan can go to market and get 7% to 8% rates. >> think about in the last month, greece and preaka raised over $5 billion in the credit markets. >> so i sense that's a tremendous amount of froth. in corporate funds we're hearing 2.0. >> the imf warned about that. the standards giving to investors are even worse than 2011 levels. >> what what does that say to you about the financial markets more broadly. >> take us back to the stock market which is selling off. why. class classic housing stocks bottomed and topped. topped in 2005. they corrected about 20% and the biotechs today made i think a near-term bottom on the ibb, etf, and i just see massive capitulation, we have a capitulation model that measures
that, and i think there's capitulation in a lot of these names. >> specific to that area you're saying. market, and now we've seen a move back. brian, what would you say here about where the stocks goes next and why is it that we're seeing this volatility, even as you said the credit market demand is so strong. >> the spread between optimism among credit investors and pessimism amongst stock investors has never been bigger. short selling as a percentage of shares outstanding, never been higher during a bull market, other than 2011 when the u.s. got downgraded so that tells us that there can be more near term, very near term downside to stocks, but we know that once the selling has passed, and this has happened time and again the last five year, the credit flows intensify so as crazy as this credit market has been in letting greece back in, it's going to become more intense. that puts cash on to the hands of ceos. they use it to buy their stock back and stocks go ripping to new highs. seen that over and over again and that's probably what's going to happen in the next month or
so. >> one thing the two of you agree on as well is that we haven't actually seen the froth, the extent to which these markets to i hate to use the word bubble, but do you think that's where we're headed in the next couple of years? >> credit booms lead to bubbles elsewhere and we had a commodity bubble and this credit boom is going to be so long and so intense that we have a real estate bubble coming in commercial realies tate and those activities lead to higher stock prices while the credit boom is going on. >> larry. >> and i'll just say -- take the vix volatility versus the nasdaq volatility. we saw a two standard deviation spread this week for the first time since lehman. that tells you there's de-frothing going on there and there's potentially a near-term snap back rally and so much future volatility. >> quick last worth, brian, what
you're talking about with commercial real estate plays out, do you think it will be different, that the fed will do anything to keep this from playing out in anything but a classic boom/bust fashion? >> nothing that the fed can do about it. all the credit booms are driven by our pension's needs for above market returns and the fed can fight that. nothing they can do to stop it. >> all comes back to retirees. we're all complicit. >> great to see you both down here. >> have a good weekend. >> will new e-mails mean big trouble for ceo mary barra. senator richard blumenthal has been all over the crisis and will join us next. herbalife getting pummeled on a possible pyramid scheme probe. that's coming up on the "closing bell." we'll be right back. we'll be ri. ♪
...who work with regional experts... ♪ ...who work with portfolio management experts, that's when expertise happens. mfs. because there is no expertise without collaboration. mfs. gundyes!n group is a go. not just a start up. an upstart. gotta get going. gotta be good. good? good. growth is the goal. how do we do that? i talked to ups. they'll help us out. new technology. smart advice. we focus on the business and they take care of the logistics. ups? good going. we get good. that's great. great. great. great. great. great. great. great. great. (all) great! i love logistics.
welcome back. gm ceo mary barra could be in pretty big trouble. new details emerging in fwm's recall crisis suggesting she may have known more about car problems than she told congress about it last week. joining me to react in an exclusive interview is senator richard blumenthal. senator, good to see you again. >> good to see you, kelly. thank you. so your reaction, first of all,
just to the news here to these disclosures, and what further steps you'd like to take? >> gm's problems are mounting, and -- and really the best way for gm to go right now, and i mean right now, is to do the right thing, which is to establish a compensation fund, take these defective vehicles off the road. warn people that they should be grounded until they are repaired, and finally make sure that justice is done by establishing not only a compensation fund by doing the right thing and coming clean with all the facts. >> well, to take those three points that you just made, you've called for a compensation fund in the past, but i wonder at this point, this isn't just about pr, this isn't just about, you know, gm regretting the way it handled the situation, it's much, much bigger than that. what do you think a compensation at this point would really achieve is. >> a compensation fund would provide for money, and money won't bring back lives.
it won't erase the pain and it may ease it somewhat, but at least justice for the people who suffered damage, death, injury, as well as economic damage, and that's very significant, could be, in $2 billion, $3 billion, we're not sure. gm is relying on the legal shield from responsibility that it was granted in 2009 only because it concealed these defects, and that's a fraud on the court, if it's true, and it is also a fraud on the united states government that supported that legal shield, so these problems are mounting. credibility is in short supply. trust and confidence on the part of customers is going to be diminished if not eviscerated. that's why gm has to do the right thing now >> you make the point, too, that the government, do they become xlis knit all of this. both the regulators and the treasury or whomever was overseeing the bailout at the time for looking through gm's books and flagging these problems as this whole process unfolded?
>> that's why i'm urging the united states attorney general in a letter that we sent today, myself and a number of my colleagues with me, urging that the attorney general pursue this criminal investigation, so we know who knew what when, including the ceo and if people in government knew it, they may be complicit also, but let me just insist that there's no evidence yet that poem in government were aware of this defect prior to 2009. there is evidence that gm knew about it. >> there's evidence that nhtsa was aware it but it didn't rise to the level that they neemd it systemic enough to do something about it. >> that's absolutely right, kelly. nhtsa, the national highway traffic safety administration, as well as potentially others, knew about this defect and failed to put together, connect the dots, but whether that amounts to actual knowledge is a question that is open, and that's why the criminal investigation has to pursue promptly, vigorously and aggressively. >> all i'm saying is that the extent to which there's a lot of blame to go around in this case, but it's quite clear that nhtsa
as well could have done something and, again, did not. >> absolutely right, and that's why i have legislation that i proposed with my colleague, senator markey, that would require better reporting by car companies to nhtsa, but also nhtsa disclosing through an accessible database what it knows about car defects more quickly and more fully. that's a very good point. >> well, the transparency here, i'm sure there are a lot of car owners at this point who bill griffith made this point last hour. if i was driving one of these vehicles and knew it would only cost me $1 or $10 to fix or upgrade a switch, maybe i'd throw that in the next time i go and get the car inspected. why not empower the consumer to some extent to make these choices by giving them the full information. >> that is the case for consumer choice and informed consumer. i've been fighting this battle on various fronts for more than 20 years, but here's a classic example of it, and i'll tell you
another point that ought to be raised right now. for the cars that are defective, whether it's cobalt, saturns or any of the other models, are the new ignition switches reaching the dealers so they can replace the defective ones in these cars right now? >> yeah. >> that's an open question. >> dealers right now who are saying they are a critical part of the way we buy and sell cars in this country with regard to tesla seem to also have been asleep at switch, the extent to which they were aware of the situation is up for debate, but it's now clear from the documents that mary barra are more awareness about the situation than she indicated to congress just last week. what happens now to mary barra? should she keep her job? >> that's a question that will depend on the facts that we're learning as you and i speak, and i think there will be a lot of dwhaes have to be answered by mary barr a. i asked her when she testified about exactly these kinds of questions, whether she regarded these vehicles as safe or not. the entire credibility of the
her testimony will be thrown into if, and it's still an if, she was not totally forthcoming. >> senator blumenthal, thank you for your time this afternoon. >> thank you. >> on that troubling story. more breaking news on herbalife. dominic chu joins us with the latest. >> kelly, cnbc has learned that the fbi is investigating herbalife but that there is no evidence of criminal activity at this time, this all according to a source familiar with the situation. remember also cnbc has learned that primetime news magazine "20/20" is preparing an in-depth piece on herbalife. it's not yet clear if the "20/20" story will address the investigation into herbalife. also worth noting, of course, that cnbc has also done its own in-depth story on herbalife, the company, so, again, the fbi is investigating herbalife. cnbc has learned, that's according to a source familiar with the situation. kelly. >> that's right, following it
afghanistan, in 2009. orbiting the moon in 1971. [ male announcer ] once it's earned, usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection. and because usaa's commitment to serve current and former military members and their families is without equal. begin your legacy. get an auto insurance quote. usaa. we know what it means to serve. welcome back. take a look at herbalife. shares down about 14%. today the spotlight back on the company amid news of a criminal investigation by the u.s. justice department and the fbi. now with us for more on the news is the reporter who broke the story. u.s. regulatory correspondent for "the financial times" and also joining us our own herb
greenberg along with the rest of the panel. thank you, both, for being here. kara, how significant is this news? >> well, it's a new development in the whole story of herbalife since bill ackman issued his reports almost two years ago, and it's the first indication of potential criminal wrongdoing, although to be clear no charges have been filed, and it's an investigation to determine whether any charges would be filed. >> herb, is that 14% selloff warranted? >> well, you could argue was the wise warranted given the uncertainty around the stock and that's been per mentioning to me. we did our documentary selling the american dream, well over a year ago, raising guess on our -- we had an eight-month investigation too this thing or however many month it is. we've watched this thing bounce back and forth knowing full well there's issues that need to be addressed and perhaps now they will be addressed and it's to
see if the fbi and federal go further whether they are looking at things like mail and wire fraud, things like that. of course, we don't know what they are actually looking at. >> based on all the reporting that you've done, herb, i was surprised how many investors are still interested in this stock but many investors don't realize they own it because it's in their 401(k). i just did a little bit of research, one of the top holdings in the did i felt growth company fund. that fund is the top mutual fund in microsoft's 401(k), one of the top funds in gm's 401(k), deere and company, maybe ours, i don't know. a lot saying i don't want to part with this stock right now. they may own it and not realize it. >> looking back you would say this is a fabulous business but the thing that perplexed me as we watched the battles with carl icahn on one side and ackman on
the other, wait a minute, we all know that this is a company that does have issues, so where does the uncertainty lie, and where is the fiduciary for the invest snors what i would like to know for the mutual funds, what kind of research have they done? have they really gone out and done the deep dive that you would expect them to do in light. situation here? >> isn't the problem that they almost have to do to the work to justify taking a name out of an index that they are tracking? if the maime is in the index, there almost has to be a rationale for taking it out? that's where they need to start building work, should they not? >> the minute we came out with our piece and ackman came out with his, you have to do the work of more than one people. >> holdings as of the end of february. there's been so much reporting around this issue. >> the stock hit $82 in between,
february, might still wanted to have been in there. i've been amazed at these releases. >> kara, here's what i wonder as well. sources now telling us, you know, they are not aware of evidence of criminal activity here, and herbalife is saying the same thing so how unusual is it for the fbi and doj to open an investigation that doesn't perhaps come to fruition with criminal charges? >> well, it does happen. i mean, it's not -- it's not a given that every investigation is going to uncomfort criminal wrongdoing but the fints you have made questions being raised about this company. not surprising that the fbi would get involved and j would got involved. i think that's the point of the veegs is to get to the bottom of that and determine what if these
reports are true and what my not be substantiates. herbal life said we're not aware of any on going investigations. >> i think if we look at some of the insider trading investigations, it was sometimes the company or the founders that were the last ones to know that they were under investigation. i think to do an investigation you're going to have to talk to the people that might have been buying the product, what were they told about the products? in order to see if there's any legitimacy to any of these fraud claims. so i don't think it is surprising that the company doesn't know. if the next seems to get legs the company might be asked for information, might be asked to provide their side of the story but if there doesn't seem like there's anything there it might end right here. >> on a nim like herbalife, feb,
if funds hold and will some sell. >> we were long hermive in a number of our fund. our analyst tom banks loved it and the stock did very well, and it was when the whole thing first broke, ackman, icahn, we realized this information was no longer analyzable and we took it out. it was a relatively easy decision. not as easy a decision with the stock down 14% in one day. >> herb, we'll give you the last word here. >> just remember one thing. this is all about whether distributors are making more money recruiting other distributors or selling the product, and that's where this gets very cloudy, and that sort of gets lost in all the shots and the mudslinging that gettorsed around here. that's what you watch in the end. and that is what the federal trade commission if they do an economic analysis.
>> this winter was not about just the snow, more extreme weather is becoming more common throughout the year and how that's creating both risks and opportunities for wall street and for your investments. we'll be right back. we'll be ri. make it happen with fidelity active trader pro. it's one more innovative reason serious investors are choosing fidelity. call or click to open your fidelity account today.
welcome back. climate change is one of those issues that can impact virtually any company across any industry, and it's also a hot topic in this month's edition of a hot t this month's institutional investor. we have the editor joining me on the floor. good to see you. >> nice to see you. >> there in is some forced selling that could start to happen as climate change becomes more of a policy issue that investors need to know about. >> there's a lot of reasons why investors need to know about climate change. clearly it's a big risk, but it's an opportunity for companies. if a cap and trade policy gets enacted, that's certainly going to have an impact on companies immediately. >> how much so? let's assume first of all that these things happen, how big an impact could it be and how exposed can people figure out that they are?
>> the carbon producers, the energy companies, they're directly impacted, utility companies, and if there is some sort of tax, it's estimated that about 80% of the reserves are never going to be able to tap. i mean, if you were to actually pull that 80% out of the ground we'd go way over the carbon limits. so basically companies are sitting with all this on their balance sheet that they're never going to be able to use. so for the energy companies it's a big deal. but it also affects all companies. climate change is an issue, really, that impacts every company in every industry. >> what's interesting about this is that, and i know people who personally were going to work on specifically cap and trade or carbon tax that lost their jobs with -- when it went no where are under the obama administration. >> there in's a lot of momentum, if you go back to mccain and obama during the primaries, they were both talking about climate change and things like cap and
trade or carbon tax. the financial crisis basically put an end to that, because it was such an immediate concern. the thing about climate change, it's longer term. it plays out over decades. it doesn't play out over quarters or weeks or days the way most investors are focused. >> you mentioned there are a couple of ways that investors can tell how exposed they might be to these policy moves. the carbon disclosure asset, helps them figures out what are the emissions levels of their own portfolios. there are people who hate to talk about this political issue. but it sounds like there needs to be more awareness about it than what most investors currently have. >> the good news is there's more awareness on the part of the companies. if you go out and look at the largest global companies they're publishing sustainability reports, they're providing information for folks like the
carbon disclosure project which have detailed analysis of what their carbon footprint is, what their expenses r there's a group out of san francisco that is actually putting in place metrics that companies will hopefully follow that will enable them to have, investors to have uniform information about companies' climate exposure. >> and there's so much information in the latest edition. more breaking news now. phil la bow joins us. can you clarify the extent to which things currently stand. we know mary barra knew more than what she reflected to congress last week. >> we have a response from general motors regarding that specific issue, remember, all of this stems from the fact that mary barra has said from the beginning of this entire thing
back in january, i had no knowledge about what was going on with the cobalt, the ignition switch until it was brought to our attention by the committee. documents came out where an e-mail was sent to her regarding a saturn power steering issue. general motors has just release add statement saying the e-mail to mary barra references a saturn ion steering issue which is completely separate from the gm recall. we have no idea whether she has sent any follow up e-mails. there's no documents that she since a follow up e-mail. that's gm's response that they are maintaining she did not have any knowledge of this prior to january of this year. >> right. and phil, that's going to be an extremely important development to watch. thank you very much. the hits keep on coming in the meantime. we have breaking news on amazon.
what's going on? >> how about smartphone chatter again. sources are saying amazon is preparing to release a smartphone in the second half of this year. they will announce this phone by the end of june and begin shipping by the end of september. also this amazon phone is going to have some kind of 3d-like display screen without the use of special glasses. all of this from sources. but, again, more chatter about amazon launching its own version of a smartphone. back over to you. >> and a 3d one at that. oh, my goodness. thank you, dom. up next sha, the panel willl us what they are watching for, in 3d maybe. in 3d maybe. polar vortexes, road construction, and gaping potholes. so with all that behind you, you might want to make sure you're safe and in control. ford technicians are ready
to find the right tires for your vehicle. get up to $120 in mail-in rebates on four select tires when you use the ford service credit card at the big tire event. see what the ford experts think about your tires. at your ford dealer. maestro of project management. baron of the build-out. you need a permit... to be this awesome. and you...rent from national. because only national lets you choose any car in the aisle... and go. and only national is ranked highest in car rental customer satisfaction by j.d. power. (aaron) purrrfect. (vo) meee-ow, business pro. meee-ow. go national. go like a pro. you'd do that for me? really? yeah, i'd like that. who are you talking to? uh, it's jake from state farm. sounds like a really good deal. jake from state farm at three in the morning. who is this? it's jake from state farm. what are you wearing, jake from state farm?
[ jake ] uh... khakis. she sounds hideous. well she's a guy, so... [ male announcer ] another reason more people stay with state farm. get to a better state. ♪ [ male announcer ] when fixed income experts... ♪ ...work with equity experts... ♪ ...who work with regional experts... ♪ ...who work with portfolio management experts, that's when expertise happens. mfs. because there is no expertise without collaboration.
welcome back. what a week it's been, what a day it's been. we're already gearing up for a big week ahead. we want to get thoughts from the panel on what they are watching. >> there are 11 ipos. we had a few false starts today you'll see a backup in the ipo market depending on what happens next week. >> slow down in the economy and the earnings, is it all about the weather or not?
>> we get the retail sales report on monday. >> i'm going to see what mutual funds companies own and if it's in my 401(k). >> what were those? >> fidelity group fund. >> this is not just a battle of the billionaires. >> we'll be interested in some clarification on monetary policy thoughts. >> did you survive the show today? >> it was -- >> we had a little bit of news there. >> whiplash. >> exactly. thank you all very much. have a great weekend. and of course we'll keep an eye after we've seen a pretty sharp two day -- the melissa lee, what is on top? a very rough week. we had some big pull backs for the week. we're going to take a look at
the biggest stocks facing the biggest pull backs and whether they're buy, sell or hold. >> that is the question. if they can answer it, that would help us all out. it's going to be a long weekend. a lot of homework to do. >> it will be. fast money starts right now. the nasdaq getting hurt the highest. is this a buying opportunity? or will the sell-off get worse. our traders tonight are tim seymour -- but first breaking news on general motors on what mary barra knew about the recall. a lot of documents coming out this afternoon from the house energy and commerce commit eye. 2,000 documents in all handed over from general motors and the national transportation safety committee. what's getting a lot of attention this afternoon is one particular e-mail sent to mary barra back in 2011.